Barrick to Spin Off Gold Assets, Increase Cerro Casale Interest

Barrick Gold’s year-end 2009 report included an announcement of plans to spin off its African assets into a new company, African Barrick Gold (ABG), which will seek listing on the London Stock Exchange. ABG will hold Barrick’s four African gold mines—North Mara, Bulyanhulu, Tulawaka (70% owned by Barrick), and Buzwagi, all located in Tanzania—and its African exploration properties. ABG will offer approximately 25% of its equity to the public in an initial public offering (IPO), and Barrick will retain the remaining interest.

ABG’s four mines are expected to produce 800,000 to 850,000 oz of gold (100% basis) in 2010. Reserves as of 2009 totaled 16.8 million oz. Post IPO, ABG will have a strong balance sheet, with $280 million in cash and no debt.

Barrick also announced it has agreed to acquire an additional 25% interest in the Cerro Casale project in Chile from Kinross Gold for consideration of $475 million, comprised of $455 million cash and the elimination of a $20 million contingent obligation that was payable by Kinross to Barrick on a production decision. The purchase increases Barrick’s interest in Cerro Casale to 75% and places it in control of the project.

Feasibility study optimization work at Cerro Casale is complete. Pre-production capital is expected to be about $4.2 billion (100% basis). Barrick’s 75% share of average annual production is anticipated to be about 750,000 to 825,000 oz of gold and 170 million to 190 million lb. of copper in its first full five years of operation at total cash costs of about $240 to $260/oz.

Cerro Casale is one of the world’s largest undeveloped gold-copper deposits, with reserves of 23.2 million oz of gold and 5.8 billion pounds of copper, providing for an expected mine life of about 20 years.

In updates on its current projects, Barrick reported Cortez Hills is scheduled to come on stream in 2010, Pueblo Viejo is scheduled to come on stream in 2011 and Pascua Lama is scheduled to come on stream in 2013.

Cortez Hills, located adjacent to Barrick’s existing Cortez Pipeline mine in Nevada, is essentially complete and in the final stages of commissioning. Start-up is subject to the mine being allowed to operate consistent with Barrick’s motion for a limited preliminary injunction of activities, currently before the U.S. District Court. Plaintiffs have sought a broader injunction that would enjoin further construction and operation of the project pending completion of a supplemental EIS.

The Pueblo Viejo project in the Dominican Republic is advancing on schedule with initial production anticipated in the fourth quarter of 2011. The majority of site preparation earthworks have been completed, about 44,000 m3 of concrete have been poured, and 1,500 mt of steel have been erected. The project continues to track within its budget estimate, but as a result of a plan to accelerate a previously announced expansion in processing capacity, pre-production capital will increase about $0.3 billion to $3 billion. Reserves at Pueblo Viejo have increased to 23.7 million oz, providing for an expected mine life of more than 25 years.

At Pascua-Lama on the Chile-Argentina border, detailed engineering is about 90% complete and spending remains within the pre-production capital budget of $2.8 billion to $3 billion. Major earthworks on the Chilean side are advancing, the portal has been established for the tunnel that will be used to ship ore between Chile and Argentina, and the Barrealis camp has been progressing well, with about 540 people currently on site. In Argentina, contractors for early earthworks site preparation have mobilized to site. Over 25% of the budgeted Pascua-Lama capital has been committed, securing the mining fleet, processing mills, camp accommodation, and earthworks contractors.